House Committee on Finance (05/02/2006)

Final
STAFF SUMMARY OF MEETING

HOUSE COMMITTEE ON FINANCE

Date:	05/02/2006	ATTENDANCE

Time:	01:08 PM to 02:53 PM	Benefield	X
		Cloer	X
Place:	SupCt	Crane	X
		Frangas	X
This Meeting was called to order by		Garcia	X
	Representative Vigil	Harvey	X
		Jahn	X
This Report was prepared by		Kerr	X
	Ron Kirk	Marshall	X
		Massey	X
		McCluskey	X
		Judd	X
		Vigil	X
		X = Present, E = Excused, A = Absent, * = Present after roll call

Bills Addressed:		Action Taken:
SB06-235		Amended, Referred to the Committee of the Whole

01:08 PM -- Senate Bill 06-235 - Concerning PERA

Representative Marshall, prime sponsor, began by distributing amendments L.012 (Attachment A), L.013 (Attachment B), and a fact sheet on the bill (Attachment C). She explained that the amendments make a number of technical changes and addressed Section 3 of the bill that references COLAs. Within each of the state, school, local government, and judicial divisions of PERA, provisions in the bill create an annual increase reserve. Representative Marshall briefly discussed Section 4 in the bill that reduces the maximum amortization period to 30 years from 40 years and asked Mr. Greg Smith, PERA, to address sections in the bill.

The following persons testified:

01:17 PM --

Mr. Greg Smith, PERA, testified in support of the legislation and commented on sections in the bill. Mr. Smith began by saying that Section 1 in the bill governs the anti-salary spiking measure. For current members who retire after January 1, 2009, for purposes of the calculation for Highest-Average-Salary, provisions in the bill limit salary increases to 15 percent. Mr. Smith continued to explain sections in the bill. Section 4 of the bill reduces the amortization period from 40 to 30 years. This section reduces the maximum amortization period that is considered actuarially sound for each of the PERA trust funds in compliance with GASB rules.

The committee and Representative McCluskey commented on the makeup of the PERA Board and discussed whether the membership of the board reflects state employee membership by retiree group. Mr. Smith continued to discuss Section 19 in the bill regarding COLA adjustments. For members hired after January 1, 2007, provisions in the bill ensure that an actuarial assessment be performed before the General Assembly can increase any benefits. Provisions in the bill allow an annual increase in benefits only if 10 percent of the amount in the annual increase reserve is sufficient to fund the net present value of the actuarial liability associated with the lower of a 3 percent increase or an increase equal to the change in the CPI.

The committee discussed the return on investment for the PERA portfolio and whether there are any safeguards in place to guard against a financial meltdown. Mr. Smith commented that the volatility in the portfolio results from the large holdings of equities and commented that PERA did very well in terms of return on investment in early 2006. PERA saw a $800 million week last week in terms of return on investment. Mr. Smith concluded saying the high rate of return is related to the significant equity position of the PERA portfolio.

01:42 PM --

Judge James S. Casebolt, PERA Chairman of the Board, commented that the board has been working on this solution for several years. Judge Casebolt responded to committee questions regarding another economic downturn's effect on PERA. Judge Casebolt closed by commenting on fund diversification and the 8.5 percent rate of return assumption on PERA investments for calculating unfunded liability.

01:50 PM --

Mr. Steve Adams, representing a number of public employee workers, testified in support of the bill and commented that the PERA retirement plan is the replacement for social security. Senate Bill 06-235 is an effort by state employees to solve their own retirement issues by making a significant sacrifice. Mr. Adams closed by saying that state employees are stepping up to protect taxpayers. He urged the committee to vote for the legislation.

01:53 PM --

Mr. Ben Stein, Deputy State Treasurer, testified in opposition toward the bill and distributed the following: a statement of opposition to SB 06-235 by the State Treasurer (Attachment D); a talking points sheet (Attachment E); and a final report to the State Treasurer by the Commission to Strengthen & Secure PERA (Attachment F). Mr. Stein commented on the handouts discussing successful pension plan governance in Colorado. He pointed out that the FPPA funding ratio is 100 percent and the Denver Employees Retirement Plan has a funding ratio of 98 percent. Mr. Stein commented on the board composition for each pension plan discussing the professional credentials for board members.

Mr. Stein closed by discussing the importance of the governing board. PERA needs a responsible board composition that is made up of a 15-member board rather than a larger 20 member-board.

02:10 PM --

Mr. Dan Daly, testified in support of the legislation and commented on the ability of the legislation to restore funding for the pension plan.

02:18 PM --

Mr. Jim Manual, representing self, testified in support of the bill.

02:22 PM --

Ms. Connie, Anderson, PERA retiree, commented on the contributions that many PERA retirees have made to the state over the years. Ms. Anderson urged committee members to support the legislation.

02:27 PM --

Mr. Mike Coffman, State Treasurer, said that the legislation is a step in the right direction but there needs to be a balance between the employer, employee, and taxpayer. Mr. Coffman commented on the board size and composition.

02:38 PM --

Mr. Meredith Williams, Executive Directive for PERA commented on the legislation and previous rates of return for the PERA portfolio. Mr. Williams closed by discussing the legislation and its effect on the PERA pension plan.


BILL:	SB06-235
TIME:	02:48:05 PM
MOVED:	Marshall
MOTION:	Moved amendment L.012 (the amendment makes a technical change). The motion passed without objection by those members present.
SECONDED:	Benefield
		VOTE
	Benefield
	Cloer
	Crane
	Frangas
	Garcia
	Harvey
	Jahn
	Kerr
	Marshall
	Massey
	McCluskey
	Judd
	Vigil
Not Final YES: 0 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: Pass Without Objection


BILL:	SB06-235
TIME:	02:48:56 PM
MOVED:	Marshall
MOTION:	Moved amendment L.013 (the amendment makes a technical change). The motion passed without objection by those members present.
SECONDED:	Benefield
		VOTE
	Benefield
	Cloer
	Crane
	Frangas
	Garcia
	Harvey
	Jahn
	Kerr
	Marshall
	Massey
	McCluskey
	Judd
	Vigil
Not Final YES: 0 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: Pass Without Objection


BILL:	SB06-235
TIME:	02:49:20 PM
MOVED:	Marshall
MOTION:	Refer Senate Bill 06-235, as amended, to the Committee of the Whole. The motion passed on a 13-0-0 vote.
SECONDED:	Garcia
		VOTE
	Benefield	Yes
	Cloer	Yes
	Crane	Yes
	Frangas	Yes
	Garcia	Yes
	Harvey	Yes
	Jahn	Yes
	Kerr	Yes
	Marshall	Yes
	Massey	Yes
	McCluskey	Yes
	Judd	Yes
	Vigil	Yes
Final YES: 13 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: PASS

02:53 PM

Adjourn